Government of Canada: Deferral of change in capital gains inclusion rate
On January 31, 2025, it was announced that the federal government is deferring—from June 25, 2024 to January 1, 2026—the date on which the capital gains inclusion rate would increase from one-half to two-thirds on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and most types of trusts.
(In the 2024 Federal Budget, the Federal Government proposed that the inclusion rate for capital gains for corporations, individuals and trusts would increase from one-half to two-thirds of the actual capital gain and that individuals would retain the one-half inclusion rate on the first $250,000 of capital gains annually. The increase was proposed to be effective for capital gains realized on or after June 25, 2024. The capital gains inclusion rate represents the portion of capital gains that is taxable.)
Under the original proposal, the government had proposed to increase the Lifetime Capital Gains Exemption to $1.25 million, effective June 25, 2024, on the sale of certain small business shares and farming and fishing property. This proposal remains in place.
In Budget 2024, the government had also announced a new Canadian Entrepreneur’s Incentive beginning in the 2025 tax year. The inclusion rate will be one-third on up to $400,000 of eligible capital gains. After 2025, the maximum would increase by $400,000 each year, reaching $2 million in 2029. This proposal remains in place.
This all remains as proposed legislation and not law until a new bill is introduced. However, it provides clarity that the 2024 tax returns can be filed at the one-half inclusion rate.
If your corporate or estate tax return has already been filed using the proposed two-thirds capital gains inclusion rate, we will follow up with you on next steps.
Please see the linked Commentary for more details on these items.
